The ATO is increasing its focus on employers who provide work vehicles for private use. Sophisticated data matching means assumptions and shortcuts can quickly lead to audits, penalties, interest charges, and reputational damage.
If you provide vehicles to your team, whether to support field work, boost morale, or offer a valuable perk, now is the time to ensure your FBT reporting is watertight. Here’s what the ATO is focusing on, and how to protect your business.
Don’t assume dual-cab utes are automatically exempt
Dual-cab utes are popular in trades and construction, although they are not automatically exempt from FBT.
Whether an exemption applies can depend on the vehicle’s design and how it is used throughout the FBT year.
Even if a ute is designed to carry a load of at least one tonne, meaning it is not classified as a car for FBT purposes, or it is not designed mainly to carry passengers, FBT may still apply where there is private use.
The ATO has identified many cases where employers incorrectly claimed full FBT exemptions, leading to back taxes and interest.
The best way to manage ATO enquiries about the FBT exemption for commercial vehicles is to ensure the right evidence is already in place to support the exemption. While the FBT rules do not specifically require formal logbooks for this exemption, failing to keep records similar to a logbook can make it much harder to respond to an ATO review or audit.
If a full FBT exemption does not apply, FBT is generally calculated based on the private use of work vehicles. You need to determine what portion of running costs, including fuel, maintenance, and depreciation, relates to personal trips. Ignoring this step may seem minor, although it can quickly become costly during an audit.
Thorough record keeping and proper apportionment can sometimes reduce your FBT liability, even where the vehicle is used mainly for business purposes.
Remember, if an FBT liability arises, it is the employer’s responsibility.
Lodging FBT returns
Even if you think the FBT liability for the year may be small or immaterial, there may still be an obligation to lodge an FBT return. The ATO’s analytics can automatically flag non-lodgers. Penalties can be up to 200 per cent of the tax owed, plus interest.
Tip: mark your calendar. FBT returns are due on 21 May each year. Lodging on time helps keep your business compliant and avoids unnecessary cash flow pressure.
Keep reliable logbooks and records
A valid logbook tracks odometer readings, trip purposes, and business use percentages over a 12-week period, and can generally be relied on for up to five years. While not every motor vehicle scenario specifically requires a valid logbook, poor record keeping can lead to significant FBT liabilities that might otherwise have been avoided.
Digital logbook apps can make tracking easier, save time, and reduce errors. Good records can also support related deductions.
Why it matters commercially
Non-compliance is not only a tax issue. ATO audits take time and attention away from running your business, and ATO scrutiny can affect how your business is viewed by clients, partners, and lenders.
Getting FBT right helps ensure you pay only what is required, protects cash flow, and may even highlight tax efficiencies.
Next steps
Review your vehicle policies, update your records, and seek advice where needed. A proactive approach can make compliance more straightforward and help protect your business, your people, and your peace of mind.
If you have questions or concerns, please do not hesitate to contact our office to speak to one of our team.
